Is my IRA an exempt asset under Medicaid?

Posted on Sep 7, 2015 10:24am PDT

IRAs are commonly used to save for retirement in a tax-deferred environment.
There is a lot of confusion however as to whether or not the IRA is counted
when determining eligibility for needs-based benefits such as Medicaid
(Title XIX).

The rule is that assets in IRAs
are in fact counted when determining whether a person is eligible for Medicaid.
IRAs are not considered exempt. Furthermore, the assets of the spouse
are counted as well when determining eligibility so the IRA of a Medicaid
applicant's spouse is also generally counted when determining eligibility
of the Medicaid applicant.

This leads many folks to go out and cash in their IRAs, which can result
in major tax consequences, and may not be the most effective strategy
for Medicaid planning.

In the case where the spouse who is not applying has an IRA, another strategy
is to annuitize the IRA. This converts the assets into an income stream,
thus the IRA assets are no longer counted when determining whether or
not the asset limit for eligibility has been exceeded. This strategy however
requires that the State be named as a beneficiary of any payments remaining
after the death of the non-applicant spouse. (Note: The use of any such
strategy should be reviewed with an elder law attorney before implementation,
and a person should not try and implement this strategy without the oversight
of an elder law attorney).

If you have any questions about IRAs and Medicaid planning, or would like
to speak with a qualified elder law attorney, you can contact our law
firm at (203) 651-5521, or if you would like to learn more about our firm,
click here to visit our website.

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